Norwegian Krone is Threatened By Potential Eurozone Slowdown, US Dollar Trends Stronger

Published: Wednesday, 23 May 2012 18:00 BST - Written by David Woodsmith

STORY LINK Norwegian Krone is Threatened By Potential Eurozone Slowdown, US Dollar Trends Stronger

Once again, the euro has hogged the currency market headlines on the day. This time, it was the voice of a ghost from the past which haunted the single currency, as former Greek Prime Minister Lucas Papademos stated that he believed that the troubled Hellenic state was making practical arrangements to leave the eurozone. This has seen share markets and the EUR USD exchange rate plummet. The future looks far from bright for Europe’s currency, unless there is a spectacular and dramatic turnaround.

The Pound has laboured on the day thanks to a negative set of Bank of England minutes. The view of the Bank’s nine-man MPC appeared to be that more quantitative easing will be required for the UK later in the year, as the eurozone’s debt crisis threatens the UK’s economy. A weak showing this morning’s British Retail Sales data served to further suppress Sterling.

Apart from the Yen, the US Dollar has been the best-performing of the major currencies on the day, as investors’ appetite for risk has drained away. Better than anticipated US housing market data this afternoon was not enough to improve investor sentiment, as market participants became increasingly fearful over the eurozone’s debt crisis.

The Norwegian Krone’s fortunes remain inextricably linked to those of the euro, which spells bad news for investors with Norwegian interests. Comments over the last seven days from global policy-makers, suggesting that they will be abandoning all-out austerity measures in favour of ‘go-for-growth’ policies, were music to the ears of the NOK. However, the danger is that the introduction of expansionary policies may be too little too late for the Krone.

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